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Amazon smart phone rumors: we could see a 'Kindle Phone' in 2012

Rumors of an Amazon-branded 'Kindle Phone' are solidifying, with the Wall Street Journal reporting that suppliers are testing components already. But would an Amazon phone make sense for customers?

Paul Sakuma/AP/File

New rumors suggest Amazon might be working on its own smart phone. Amazon will likely release a new version of its Kindle Fire tablet soon, as well, to compete with Google's Nexus 7 tablet, shown here in the hand of a Google employee.

An Amazon smart phone -- call it the Kindle Phone -- might be more than a rumor.

The Wall Street Journal reported today that Amazon's component suppliers are testing a phone with a screen somewhere between 4 and 5 inches, citing those ubiquitous "people familiar with the situation." Add this to last November's rumor that Amazon would release a handset in the fourth quarter of 2012, and a separate Bloomberg report last week that Amazon was working on a phone with Foxconn (Apple's supplier for iPhones and iPads), and it's hard not to wonder if we might see a Kindle Phone within the next year.

It wouldn't be entirely out of character for Amazon to make a move for the smart phone market. The company dominated e-reader sales for years with the original Kindle before moving into tablets last year with the Kindle Fire. Amazon might see a handset as a logical hardware step. Research firms estimatethat Amazon sells both the Kindle and the Kindle Fire at a loss; the company makes up the difference because the devices make it easy for users to buy digital media from Amazon's store. The customer base it's built while following that model could give it an edge if it decides to release a phone.

Chris DeVore, a Seattle-based analyst, even suggested that Amazon could attract customers with a free handset, including unlimited voice and data. (DeVore isn't claiming any special insight, so take his prediction with more grains of salt than usual.) The catch, he cautions, would be that the "free" phone would serve ads and otherwise push owners to make more Amazon purchases -- for example, maybe they'd have to sign up for two years of Amazon Prime -- but it would be affordable for customers and profitable for Amazon, at least over the long term. Plus, such a move would put pressure on Apple and Google, the two biggest players in the mobile phone arena.

The trick for Amazon, of course, would be navigating tricky negotiations with carrier companies, not to mention working out the details of making a handset compatible with global technical standards. Complicating things further is the fact that the iPhone and current Android smart phones have a pretty commanding slice of the market; a Kindle Phone would have to conquer territory that's already fairly well-established.

One thing's almost certain: we'll be seeing some new hardware from Amazon, of one kind or another, before too long. Its popular 7-inch Kindle Fire tablet is now 7 months old, and the China Timesreported last week that a new version is already in production. Amazon needs to stay ahead of Google, whose Nexus 7 tablet, released last month, offers a higher-resolution screen and significantly improved specs for the same price as the Kindle Fire.